Safety net made in good times might fail in tough times

Weather troubles, loss of market access and American farm aid will force whatever party becomes government in Canada after next month’s election to take further steps to support agriculture.  |  Maria Johnson photo

It is likely going to be a miserable year for crop income, and whatever party wins the federal election this fall will likely encounter increasing requests for agricultural income assistance.

The harvest in much of Western Canada is already the slowest in many years. Recent rain has downgraded the quality of many standing crops and as combining drags on into October, the chances increase for bad weather to further damage quality and the potential revenue from crop sales.

On top of this are the trade problems that limit the sale of canola to China, durum to Italy and pulses to India.

Furthermore, Canadian crop producers are suffering collateral damage from the trade war between the United States and China, which has depressed the price of soybeans, which in turn lowers the value of all oilseeds, including canola.

In total, the line-up of impediments to farmer income might be the worst that it has been since the 1980s and 1990s. I fear these pressures will result in a policy landscape that was common early in my career as an agricultural reporter: trade actions, weather problems, tariffs, government bailouts and farmer alienation.

The severity of the situation has already caused a large number of farm groups to come together under the banner of the AgGrowth Coalition to demand a reassessment of the business risk management programs.

The latest versions of these programs were put together during times of relative prosperity and now look to be inadequate to lessen the damage from the combination punches being inflicted on the industry today.

It will be interesting to see how governments react to demands for reforms of the farm safety net.

The AgGrowth Coalition says the export-oriented sector of Canadian agriculture should be given the same respect and assistance that the federal government gave to dairy farmers. In August the federal government announced a $1.75 billion package to compensate supply-managed dairy farmers for market loss stemming from the trade deals with the European Union and the Trans-Pacific Partnership. The Liberal government said that once the new North American free trade agreement is ratified by all parties, further compensation would be announced.

It seems reasonable for the AgGrowth Coalition to equate the situation of dairy farmers to that of crop and livestock farmers who export their commodities. Both are suffering from political decisions made outside of farmers’ control.

However, an argument could also be made that the dairy aid is tied to a decision made by the federal government to bargain away part of the supply management system in trade negotiations. But in the cases of Italy and durum, China and canola, and India and pulses, it was the governments in those countries that made the decision, not the government in Ottawa.

Those decisions were out of Ottawa’s control, although it can control its response to them.

The federal Liberals increased the loan limit under the Advance Payments Act. This offer to provide increased loans was similar to the government aid to Canadian steel and aluminum producers when the U.S. imposed 25 percent tariffs on them.

But the U.S. tariffs ended fairly quickly, whereas the agricultural trade problems are dragging on and loan packages are clearly inadequate.

The government is also helping agricultural marketing efforts to sell more to other countries. This is good for the long-term, but not an immediate help.

The government can also discuss directly with the countries limiting or blocking our imports and if those talks don’t get relief, as in the case of China and Italy, it can take a complaint to the World Trade Organization. It is a slow and costly process and if Canada wins, the offending country usually changes its behaviour, but not always. In cases where the offending country refuses to change, the WTO gives its blessing for Canada to impose punitive tariffs on goods from that country. And tariffs cut two ways. They limit the other country’s international sales but they also hurt the Canadian consumer who either goes without the product or has to pay more for it to cover the tariff.

The American consumer is experiencing this from the tariff war between the U.S. and China, which so far has not achieved a change in Beijing’s attitude toward its unfair trade and business practices.

And speaking of the U.S., I should note that the federal government there is supplying aid to farmers hurt by its decision to start a tariff war with China.

The package totalled US$12 billion last year and $16 billion this year.

Bloomberg News notes that at a total of $28 billion, that is more than twice as expensive as the 2009 bailout of American auto makers in the wake of the financial collapse, which cost taxpayers $12 billion.

The aid does not fully compensate for the losses American farmers are incurring but it softens the blow and, at least for now, helps to maintain President Donald Trump’s popularity in rural areas.

Ultimately, I think whatever party becomes government in Canada will be forced to take further steps to support agriculture here.

We have gone through a lot of adjustments over the past 20 years or so, both nationally and internationally, to make the market the most important source of farm income, rather than the government cheque in the mailbox.

I fear that a rising trend of protectionism has the potential to wipe out those gains.

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